Monday, January 7, 2019

Buried By Lies

Nothing lies as much as trapped capital. The bull case is so flimsy now, you have to be brain dead to believe it. Which is why it's the consensus view...

This gong show went on just long enough to convince lifelong dunces that they are geniuses. The zombies have been guzzling Faux News for so long they don't know their ass from a hole in the ground. The cold irony of markets is that seeking cozy consensus on market direction at the end of the cycle, is lethal. Like-minded dunces locked in a comfort-seeking circle jerk. 

At this late juncture, having bounced off of bear market, one would think that the burden of proof is finally on the bulls, but one would be wrong. Fake optimism springs eternal, fed by the vacuous guidance of ubiquitous used-car-salesmen turned financial advisors. To recap, U.S. stocks peaked late last September on the basis of tax cut optimism, record consumer confidence, record business confidence, record earnings growth, record stock buybacks, and most importantly, "decoupling" from the rest of the world, which has been imploding for a year straight now. Fast forward, and all of that record good news is in the rear-view mirror. Over a trillion dollars squandered on buybacks, slowing earnings growth, collapsed speculative fervor, and most importantly, decoupling was proven to be a total hoax.

In other words, all of the good news that bid the casino to record highs, led to a -20% plumb line drop. Now, we are to believe that new highs are possible on the basis of none of the conditions that attended September's peak. Sure.

What we are witnessing is trapped capital on an historically unprecedented scale, attempting to lie itself out of the noose. This last rally was due to the fact that the casino was extreme oversold two weeks ago. Now it is extreme overbought. And yet despite the furious counter-trend rally, the S&P (today) just barely managed to tag the underside of the February low:

The Nasdaq kissed the neckline goodbye:

If any sector would have benefited from the blowout jobs report which sent bond yields sky-rocketing, it would have been banks:

Speaking of bond yields, Treasury shorts are about to get final bludgeoned, as yields are back-testing the support line:

A forced unwinding of bond yields will precipitate a domino crash across the crowded carry trade

Tonight, Samsung confirmed the Y2K 2.0 slowdown is real:

Semiconductors, pole axed by Apple last week, will get backed over by Samsung:

Europe is ready to final implode

As I've said, the biggest delusion of all - now firmly disproven as recently as last week with Apple's revenue implosion, is the fantasy of U.S./World decoupling. A delusion that has been well-cultivated by the Trump Administration in order to propagate the trade war.

Just today, Trump's cluelessly out of touch trade advisor openly threatened to use social unrest in China as leverage in the trade war:

"Commerce Secretary Wilbur Ross does a cracking impression of an out-of-touch, 19th-century robber baron...during a 2014 appearance on Bloomberg TV, he famously told the unwashed masses to quit moaning about income inequality and leave the the 1 percent alone" an appearance on CNBC Monday, this is how Ross characterized China’s slowing economy [due to the trade war]:"

“It’s only a big problem in their context of having a very big need to create millions and millions of jobs to hold down social unrest coming out of the little villages,“

Then Ross goes on to say that the trade war has had no impact on the U.S., even denying that the trade war has impacted Apple revenue. On the one hand, he claims the trade war is affecting the Chinese economy, on the other hand he claims it's not affecting Apple sales which are tanking in China. In the event he directly contradicts what Apple CEO, Tim Cook, said last week.

"...most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad."

Worse yet, he contradicts his own colleague:

“It’s not going to be just Apple,” CEA chairman Kevin Hassett said in an interview on CNN. “There are a heck of a lot of U.S. companies that have sales in China that are going to be watching their earnings being downgraded next year until we get a deal with China.”

In summary, I predict social unrest in 2019, directed specifically at sociopathic con men who lie continuously: